Five frequently asked questions about Bitcoins
What are Bitcoins?
Bitcoin is a virtual currency that you can buy with real money. That may sound a bit off the wall, but it’s not just a fad. If you buy a gift card, or coins at the fair, you do basically the same thing. The main difference lies in who spends the coins. That’s not the merchant or the showman. It is not even the bank or government. They are participants in Bitcoins themselves, the one’s who manage the currency.
The big advantage is that the currency can be exchanged between participants, without anyone in between, no middle-men, per se. And in a time when people have less and less confidence in centralized banks and government institutions, Bitcoin seems to be an attractive alternative to many.
The world is beginning to see a big shift in bitcoin lately.
It used to be laughed at in the past and
several countries, out of fear alone, banned the techno-trinkets, concerned over the thought it might be a scam. But over the years bitcoin has proven it is a force to be reckoned with, and the bankers are starting to stand up and take notice. With the recent announcement of the new Bitcoin debit cards and having the ability to withdraw cash for bitcoin at ATM’s, the rest of the world is beginning to raise an eyebrow or two also.
Who is the boss or founder of Bitcoin?
Japanese programmer(s) going by the name of Satoshi Nakamoto is said to have invented Bitcoin, but who “he” is and whether he actually exists as anything more than an individual or group of individuals posing under a pseudonym is still unclear. He [sic] noted by way of publication, that not a bank, but the computers of all the participants jointly, are the ones who manage the system and authorize the transactions. On the basis of his ideas, programmers worldwide have gone to work and they have built the open-source software that makes this possible. And because it is open-source, anyone can contribute.
The system relies upon the use of heavily cryptographed code in order to prevent currency reprints. Adding another node to the system is a matter of plug-copy-paste. However, there is only a certain number of bitcoins (max cap) that will be issued. There is what is called an End of Life (say 40 years from now or so), therefore, scarcity is inherently built-in to the system. In fact, some analysts, among others, particularly those of the European Central Bank, are often found comparing Bitcoins with gold.
Where do the coins come from?
Although you may find graphical depictions of Bitcoin across the web, the “coins” themselves are not beaten out of raw materials like silver or gold, but calculated by way of an algorithm. This is called ‘mining’. The algorithm used Bitcoin is designed so that as there are more Bitcoins, more and more computing power is needed to calculate them. Whoever participates in calculating can receive a “commission” in self-made Bitcoins.
But now the demand is so great and the difficulty level so high that it only pays to mine Bitcoins with special, yet rather simple, micro-computers.
There are some dedicated proponents who build these mini mining machines by hand for the cost of a Foxconn worker in China. Beyond that, more and more companies are sprouting up almost daily to satisfy the insatiable curiosity of those like yourself who might be interested in where they can buy their own bitcoin machine. You can even request plans from those in the know to build your very own, if you’re so technically inclined to do so.
How do I get Bitcoin?
There are several market places where you can buy bitcoins in exchange for euros or dollars. The easiest way by far is Coinbase. The best known bitcoin vendors are located in America. Here they offer more than lively trade in Bitcoins. There used to be a waiting list for those who want to participate. With the many channels now available, you can purchase bitcoin from many reputable establishments. In some exchanges, however, the price is a lot less favorable than in others.
Bitcoins are stored in an electronic, digital wallet. Bitcoin “slips” can also be printed and exchanged in real time, but this is highly discouraged and not recommended, due to the possibility of loss or theft of the printed currency. A bitcoin wallet can be held on your own computer, cell phone or operated on the Internet through a server. You can read more about it at Bitcoin.org.
What is the risk?
Just like the precious metals silver and gold, the price of Bitcoin fluctuates enormously and as of late, without much warning. So is there is a significant hint of risk being taken to invest. There is no protection against a digital market crash.
According to critics, there is at this time, again by analogy with gold, a genuine bitcoin fever in progress. And as with any runaway bull market, some say it can only end in a virtual crash. Regardless, the crypto-currency has be edging along just fine for over six years now and isn’t showing any real signs of going away anytime soon!
Furthermore, due to its transparency and decentralized nature, many governments are beginning to wonder whether they need to consider regulation. While there is no doubt that regulation is lurking in the background, it won’t come immediately. As far as lurkers, there are also the wanna-be hackers, continually seeking ways to “break the bank”. There was a point when the code became compromised and some investors played games with the system, but all in all, it’s secure socket layer (SSL) technology keeps it one step ahead of the bad guys.
Either way you stack bitcoins (if that’s even possible!), they seem to be here to stay and are making a lot of headlines in the news. As of the writing of this article (Dec. 3, 2015) the commodity known to be the next big thing in cyber-cash is trading on the stock markets (BTCUSD) for a pretty hefty sum of… wait for it…
1 Bitcoin = ~$365.00 USD.
(refer to the LIVE graph at bottom of this page)
Not too shabby if you ask this up-and-coming bitcoin aficionado…
I’ll be following up with several more posts on Bitcoin in the near future on how this trending phenomenon just might change the way we do our buying and selling online, if not our banking for years to come! So stay tuned! If you’re interested in getting involved or just want some more info on Bitcoin, Google it up, then leave me a comment below and we can Blab about it!